Westpac NZ Economics Team

Frontloading This week we talk about the RBNZ’s 50bp OCR cut and their plans for another one in February all going well. This explicit plan to frontload the easing expected for 2025 is unusual and has led us to change our forecast for the February 2025 Monetary Policy Statement to a 50bp cut with not much else to come after that. 

As expected the RBNZ delivered a 50bp cut today. We expect another 50bp cut in February. Check out our full review of today’s RBNZ announcement on the Westpac NZ Economics Team home page. Westpac New Zealand Kelly Eckhold Darren Gibbs Michael Gordon Chelsea Simmons #newzealand #economy #inflation #rbnz

The RBNZ cut the OCR by 50bps to 4.25% at its final policy meeting for this year. We now think that it’s more likely than not that the RBNZ will cut the OCR by 50bp in February 2025, contingent on the economy and financial conditions evolving in line with our expectations. After that, uncertainty around the OCR outlook is higher, but we think the easing cycle will be over by mid-year, with the OCR still troughing at 3.5%. Check out our full review of the RBNZ November policy meeting below. Westpac New Zealand Kelly Eckhold Darren Gibbs Michael Gordon Satish Ranchhod Paul Clark Chelsea Simmons #NewZealand #economy #interestrates #RBNZ

Ahead of this week's Monetary Policy Statement, we've surveyed our financial market customers here and offshore for their views on where the RBNZ is headed, and where they see the risks around their views. There's a strong consensus for a 50bp OCR cut this week, with varying views around the extent of further easing through 2025 - offshore clients remain more dovish than locals. That said, customers are also wary of the risk that policy decisions overseas could lead the RBNZ to curtail its own easing cycle. Westpac New Zealand Kelly Eckhold Satish Ranchhod Darren Gibbs Michael Gordon Paul Clark

In our latest weekly we set out our expectations for Wednesday's RBNZ policy review and summarise feedback from customers attending our quarterly Economic Overview presentations. We think that it is highly likely that the RBNZ will lower the OCR by 50bps to 4.25%. There is more uncertainty about how the RBNZ will depict the outlook for policy in 2025 given the various uncertainties currently at play, although our baseline forecast is that the updated projection will point to the OCR falling to around 3.5% by the end of next year. Meanwhile, customers expect the economy to stay about the same or strengthen a bit over the next six months - an outlook that accords with our own near-term expectations. Participants in the South Island were more optimistic than those in the North Island. Westpac New Zealand

Interesting day talking to businesses in Wellington. As expected, the mood in the Capital was more downbeat than in the South Island. But just as we’ve seen in other regions, businesses here are feeling more optimistic about where we’re headed over the year ahead. Thanks to team at Chartered Accountants Australia and New Zealand and Westpac’s Wellington Team for a great day. Westpac New Zealand Kelly Eckhold Darren Gibbs Michael Gordon Paul Clark Chelsea Simmons #economy #newzealand

The RBNZ last published projections for the Official Cash Rate in August. However, they’ve already cut the OCR faster than those projections assumed, and we think they’ll deliver another 50bp cut next week (check out our preview on the @westpac page here: https://lnkd.in/gXQeMraB ). But what will the RBNZ signal for the year ahead? The RBNZ’s last set of projections showed the OCR falling to 3.85% by the end of 2025. We think their updated forecasts will show the OCR sitting closer to 3.50% at the end of next year. Let us know what your expectations are in the poll below. Kelly Eckhold Darren Gibbs Michael Gordon Satish Ranchhod Paul Clark Chelsea Simmons #rbnz #interestrates

Strong Chinese demand has continued to lift dairy prices and has caused us to lift our forecast for Fonterra’s milk payout to $10/kg. We continue to expect that the RBNZ will cut the OCR by 50bps next week.Kelly Eckhold Michael Gordon Darren Gibbs Satish Ranchhod Paul Clark Westpac New Zealand

The consequences of the RBNZ and the RBA's different approaches to policy tightening are proving to have a long tail. Our Group Chief Economist Luci Ellis expects it will be another six months before the RBA joins the global easing trend - though once those rate cuts do begin, they're more likely to be front-loaded. See the link below for more: https://lnkd.in/gPqbzwFs

Thank you to everyone who joined us for the presentations of the Westpac Quarterly Economic Overview November 2024 with one of our Senior Economists Michael Gordon, Darren Gibbs and Satish Ranchhod and Market Strategist, Imre Speizer. For those of you that weren't able to join us, a video of the Auckland presentation, given by Michael, can be viewed on Youtube via the following link: https://lnkd.in/gWSdRtyE Westpac New Zealand